Measuring ESG effects in systematic investing

Table of contents:
Foreword xiii
C.S. Venkatakrishnan, Group Chief Executive Officer, Barclays

Preface xv
Jeff Meli, Global Head of Research, Barclays

Acknowledgements xvii

Introduction xix
Lev Dynkin, Global Head of Quantitative Portfolio Strategy, Barclays Research

Part One: Effect of ESG Constraints on Portfolio Performance and Valuation

Introduction to Part I 1

Chapter 1 How Do ESG Criteria Relate to Other Portfolio Attributes? 5

Chapter 2 Measuring the ESG Risk Premium: Credit Markets 19

Chapter 3 Measuring the ESG Risk Premium: Equity Markets 43

Chapter 4 Performance Impact of an ESG Tilt in Sovereign Bond Markets 77

Chapter 5 Effect of SRI-Motivated Exclusion on Performance of Credit Portfolios 115

Part Two: Systematic Strategies and Factors Subject to ESG Constraints

Introduction to Part II 133

Chapter 6 Effect of ESG Constraints on Credit Active Returns 137

Chapter 7 Incorporating ESG Considerations in Equity Factor Construction 169

Part Three: Performance Implications of Companies’ ESG Policies

Introduction to Part III 203

Chapter 8 ESG Rating Improvement and Subsequent Portfolio Performance 205

Chapter 9 Predicting Companies’ ESG Rating Changes Using Job-posting Data 237

Chapter 10 The Relationship Between Corporate Governance and Profitability 271

Part Four: the Lack of Uniformity in ESG Definitions—Investment Implications

Introduction to Part IV 283

Chapter 11 ESG Equity Funds: Looking Beyond the Label 285

Chapter 12 Combining Scores from Multiple ESG Ratings Providers 321

Chapter 13 The Informational Content of Dispersion in Firms’ ESG Ratings across Providers 337

Index 373

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A unique perspective on the implications of incorporating ESG considerations in systematic investing

In Measuring ESG in Systematic Investing, a team of authors from Barclays’ top-ranked Quantitative Portfolio Strategy group (ranked #1 by Institutional Investor in its 2022 Global Fixed Income Research Survey in both the US and Europe) delivers an insightful and practical discussion of how to reflect ESG considerations in systematic investing. The authors offer a cross-asset class perspective—incorporating both credit and equity markets in the United States, Europe, and China—a unique coverage scope amongst books on this subject. They discuss the interaction between ESG ratings and various other security characteristics, suggest a methodology for isolating the ESG-specific risk premia, analyse the impact of an ESG tilt on systematic strategies and risk factors, and identify several ESG-based signals that are predictive of future performance.

You’ll also discover:

Analysis of companies in the process of improving their ESG ranking (“ESG improvers”) vs. firms with best-in-class ESG ratings
A study using natural language processing (NLP) to predict changes in corporate ESG rankings from company job postings for sustainability-related positions
In-depth explorations of ESG equity fund performance and flows and the information content of ESG ratings dispersion across several providers
Perfect for portfolio managers including non-quantitative, fundamental investors, risk managers, and research analysts at financial institutions such as asset managers, pension funds, banks, sovereign wealth funds, hedge funds, and insurance companies, Measuring ESG in Systematic Investing is also a must-read resource for academics with a research interest in the performance and risk implications of ESG investing.

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(https://www.wiley.com/en-au/Measuring+ESG+Effects+in+Systematic+Investing-p-9781394214785)